Readers hoping to buy Morgan Stanley (NYSE:MS) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. You can purchase shares before the 30th of October in order to receive the dividend, which the company will pay on the 15th of November.
Morgan Stanley's upcoming dividend is US$0.3 a share, following on from the last 12 months, when the company distributed a total of US$1.4 per share to shareholders. Looking at the last 12 months of distributions, Morgan Stanley has a trailing yield of approximately 3.1% on its current stock price of $45.76. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to investigate whether Morgan Stanley can afford its dividend, and if the dividend could grow.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Morgan Stanley paid out a comfortable 27% of its profit last year.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. That's why it's comforting to see Morgan Stanley's earnings have been skyrocketing, up 27% per annum for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past ten years, Morgan Stanley has increased its dividend at approximately 2.6% a year on average. Earnings per share have been growing much quicker than dividends, potentially because Morgan Stanley is keeping back more of its profits to grow the business.
Should investors buy Morgan Stanley for the upcoming dividend? Typically, companies that are growing rapidly and paying out a low fraction of earnings are keeping the profits for reinvestment in the business. This is one of the most attractive investment combinations under this analysis, as it can create substantial value for investors over the long run. Morgan Stanley ticks a lot of boxes for us from a dividend perspective, and we think these characteristics should mark the company as deserving of further attention.
Wondering what the future holds for Morgan Stanley? See what the 21 analysts we track are forecasting, with this visualisation of its historical and future estimated earnings and cash flow
If you're in the market for dividend stocks, we recommend checking our list of top dividend stocks with a greater than 2% yield and an upcoming dividend.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.